Defense officials ‘in panic’ about US defunding of F-16 upgrade: US report

SOARING COSTS:：The magazine said Taiwan must decide whether to continue funding the jet program on its own or call for an open competition among firms

By William Lowther / Staff reporter in WASHINGTON

Mon, Mar 10, 2014 - Page 3

US magazine Defense News reported on Saturday that Ministry of National Defense (MND) officials were “embarrassed and beginning to panic” over the Pentagon’s decision not to fund upgrades for 300 US F-16 jets.

Taiwan’s 146 F-16s are also scheduled for upgrades under the Combat Avionics Programmed Extension Suite (CAPES) program and the fear is that with Washington dropping out, costs will shoot up.

The magazine quoted a ministry consultant on Taiwan’s defense as saying costs could rise by 30 to 60 percent as a result of the decision not to fund CAPES under the US defense budget announced last week.

According to the unnamed consultant, the ministry might be forced to cancel the plane’s mission modular computer, priced at US$200 million, if prices for the overall program escalate.

The nation’s air defense plans now center on upgrading the F-16s after Washington refused to sell it more advanced fighters.

US Air Force Deputy Assistant Secretary for Budget Major General James Martin told Defense News that the decision not to fund CAPES was a “tough tradeoff,” but that in the end the program was one “that we decided not to fund.”

The magazine said that Taiwan now faces a tough decision — continue funding the CAPES program on its own or call for an open competition among BAE Systems, Boeing and Lockheed for systems integration and a secondary competition between Northrop’s SABR and the Raytheon advanced combat radar (RACR) to new radar requirements.

“Cost-sharing with the US Air Force on the CAPES program’s nonrecurring engineering costs and research-and-development funding will be nonexistent,” the magazine said.

It said the US had assured the ministry that the CAPES program was “guaranteed” to go forward and that there was zero risk.

When reports of a US decision not to fund CAPES first surfaced earlier this year, Washington sources said that the costs for Taipei could soar because with the 300 US F-16s out of the program, the cost of components was bound to increase.

The Legislative Yuan has allotted US$3.9 billion dollars for the upgrades.

After Defense News said earlier this year that the US was dropping the CAPES program, the US-Taiwan Business Council issued a statement saying that reports the “alleged defunding” would negatively affect Taiwan’s F-16 upgrade program were inaccurate.

“Should this defunding occur, it will have no impact on the schedule or cost for Taiwan’s extensive upgrade program, including on the development of the Active Electronically Scanned Array [AESA] radar,” the statement said.

“The council understands that the US Air Force remains fully committed to the Taiwan F-16 upgrade program, and that their assurances are reflected in the signed Letter of Offer and Acceptance [LOA],” it added.

“That commitment ensures that the cost and schedule put in place by the LOA remains, and that the Taiwan military will not see any changes to their program even if the CAPES program is altered. This extends through the upgrade and into the sustainment of the upgraded equipment,” it added.